Norman Dowd owns his own taxi, for which he bought a $11,400 permit to operate two years ago. Mr. Dowd earns $34,200 a year operating as an independent but has the opportunity to sell the taxi and permit for $43,500 and take a position as dispatcher for Carter Taxi Company The dispatcher position pays $34,500 a year for a 40-hour week. Driving his own taxi, Mr. Dowd works approximately 55 hours per week. If he sells his business, he will invest the $43,500 and can earn a 10 percent return. Required a. Determine the opportunity cost of owning and operating the independent business. b. Calculate the earnings of Norman Dowd operating as an independent and the earnings of Norman Dowd working as a dispatcher. Based solely on financial considerations, should Mr. Dowd sell the taxi and accept the position as dispatcher? a Opportunity cost b. Operating as an independent Working as a dispatcher Should Mr. Dowd sell the taxi and accept the position as dispatcher? Rooney Concrete Company pours concrete slabs for single-family dwellings. Lancing Construction Company, which operates outside Rooney's normal sales territory, asks Rooney to pour 45 slabs for Lancing's new development of homes. Rooney has the capacity to build 340 slabs and is presently working on 120 of them. Lancing is willing to pay only $2,540 per slab. Rooney estimates the cost of a typical job to include unit-level materials, $950, unit-level labor, $550; and an allocated portion of facility-level overhead, $1,100. Required Calculate the contribution to profit from the special order. Should Rooney accept or reject the special order to pour 45 slabs for $2,540 each? Contribution to profit Should Rooney accept or reject the special order? Exercise 6-17A (Algo) Asset replacement-opportunity cost LO 6-5 Franklin Freight Company owns a truck that cost $37,000. Currently, the truck's book value is $25,000, and its expected remaining useful life is five years. Franklin has the opportunity to purchase for $26,000 a replacement truck that is extremely fuel efficient. Fuel cost for the old truck is expected to be $6,400 per year more than fuel cost for the new truck. The old truck is paid for but, in spite of being in good condition, can be sold for only $18,000. Required Calculate the total relevant costs. Should Franklin replace the old truck with the new fuel-efficient model, or should it continue to use the old truck until it wears out? Keep Old Replace With New Total relevant costs Should Franklin replace or continue the old truck? Exercise 6-22A (Algo) Scarce resource decision (Appendix) LO 6-7 Sweet Taste has the capacity to produce either 52,000 corncob pipes or 30,000 cornhusk dolls per year. The pipes cost $6.75 each to produce and sell for $15.00 each. The dolls sell for $17.50 each and cost $7.75 to produce. Required Calculate the contribution margin per unit and the total contribution margin for Pipes and Dolls. Assuming that Sweet Taste can sell all it produces of either product, should it produce the corncob pipes or the cornhusk dolls? Note: Round "Contribution margin per unit" answers to 2 decimal places. Contribution margin per unit Total contribution margin Should it produce the corncob pipes or the cornhusk dolls? Pipes Dolls Exercise 6-5A (Algo) Opportunity costs LO 6-1 Norman Dowd owns his own taxi, for which he bought a $11,400 permit to operate two years ago. Mr. Dowd earns $34,200 a year operating as an independent but has the opportunity to sell the taxi and permit for $43,500 and take a position as dispatcher for Carter Taxi Company The dispatcher position pays $34,500 a year for a 40-hour week. Driving his own taxi, Mr. Dowd works approximately 55 hours per week. If he sells his business, he will invest the $43,500 and can earn a 10 percent return. Required a. Determine the opportunity cost of owning and operating the independent business. b. Calculate the earnings of Norman Dowd operating as an independent and the earnings of Norman Dowd working as a dispatcher. Based solely on financial considerations, should Mr. Dowd sell the taxi and accept the position as dispatcher? a. Opportunity cost b. Operating as an independent Working as a dispatcher Should Mr. Dowd sell the taxi and accept the position as dispatcher